11.14.10

Am I the only person to be somewhat suspicious about the timing of this week’s revelations of withdrawal requests from Harbinger’s funds and investigations by the Securities and Exchange Commission and U.S. Attorney’s office into whether the firm “misled investors” and “improperly allowed some clients to withdraw money following the financial crisis while barring others from doing so”? Though these stories have just emerged, it appears that the withdrawal requests were submitted at the end of September, while the investigations began this summer. As a result, I have to wonder if the timing of these stories was intended to derail the next stage of LightSquared’s plans.

This last week has seen wireless operators such as US Cellular and Leap Wireless state explicitly that they could be open to becoming wholesale customers of LightSquared. T-Mobile also appears to be keeping its options open, given it has not yet struck a deal with Clearwire as was being negotiated back in September, and T-Mobile also indicated potential interest in LightSquared’s capacity this week. Whether or not these operators want to do a deal with LightSquared today, it is certainly in their interests for LightSquared to survive, and to be available as a potential source of capacity when they do reach a decision on 4G. That would, at the very least, help to hold down the price of alternative spectrum (from a source such as Clearwire or a future FCC auction), and their expressions of support come at an important moment for Harbinger.

LightSquared stated over a month ago that it had “already signed wholesale distribution agreements” and was “in advanced negotiations with numerous potential partners”. It also said that the company intended “to accelerate its planned implementation of the Phase 2 agreement, which now will take effect by the end of the year”. With today’s successful launch of the SkyTerra-1 satellite, I had expected to see an announcement of at least some of these partnerships in the very near future, in conjunction with additional equity investments (whether from wholesale partners, or perhaps more likely from other financial investors) to validate the valuation that Harbinger has placed on LightSquared. However, with Harbinger’s clients fuming, we will have to wait and see whether the recent revelations will delay or even derail these plans.